cowenecon3e_lectureslides_macro_06_econ_ch26

cowenecon3e_lectureslides_macro_06_econ_ch26 - Chapter...

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MODERN PRINCIPLES OF ECONOMICS Third Edition GDP and the Measurement of Progress GDP and the Measurement of Progress Chapter 6 (Chapter 26)
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Introduction India has both extreme poverty and rapid economic growth : Two-thirds of India’s population lives on less than $2 a day. At the same time, at least 100 million people are at an American standard of living. a remarkable increase from just a few decades ago. Gross Domestic Product (GDP) and GDP per capita gives us a way to measure changes in economic output and the standard of living. 2
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Introduction Real GDP per capita in India 3
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Definition Gross Domestic Product (GDP) : the market value of all final goods and services produced within a country in a year. 4 GDP per capita : GDP divided by population.
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Introduction 5
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GDP GDP is the market value of all final goods and services produced within a country in a year. An economy’s total output includes millions of different goods and services. Some goods are more valuable than others, so we can’t just add up quantities. GDP uses market values to determine how much each good or service is worth and then sums the total. 6
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GDP Final goods and services are sold to final users and then consumed or held in personal inventories. Intermediate goods are sold to firms and then bundled or processed with other goods or services for sale at a later stage. To avoid double counting, only final goods are included in GDP. However, machinery and equipment used to produce other goods are included in GDP. 7
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Self-Check 8 Which of the following is a final good: a. A book in Amazon’s inventory. b. Tires purchased by a Toyota plant. c. Tires purchased by you for your car.
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GDP The output of an economy includes both goods and services . Haircuts, transportation, and medical care provide a benefit to individuals without a tangible output. 9 Services are increasing as a share of U.S. GDP . Since 1950, the portion of U.S. GDP created by services has doubled from 21% to 42%.
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GDP GDP measures production , so sales of old houses, used goods, and financial assets do not add to GDP. U.S. GDP includes goods and services produced by labor and capital located in the United States, regardless of the nationality of the workers or property owners.
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